Ensuring the viability of your business in a challenging market demands a strategic vision and timely intervention. Having an insolvency expert by your side can make the difference if you are hoping to avoid liquidation.
Avoiding liquidation when business is quiet
Today, New Zealand businesses face pressures from all sides—fluctuating consumer spending, regulatory constraints, competitive forces, and global economic instability. For business owners, this often translates into sleepless nights and the lingering question, ‘Is insolvency inevitable?’ Fortunately, there are many steps that can be taken before insolvency becomes an inevitability.
Understanding the available options and taking proactive measures with the help of an insolvency expert can not only help to avoid liquidation but also find a path to viability.
Businesses willing to seek expert advice early will be rewarded with solutions to slowing cash flow and business uncertainty.
The Current NZ Market: A challenging landscape
New Zealand businesses are no strangers to adversity. In recent years, sectors such as retail, hospitality, construction, and manufacturing have felt the heat. The latest insolvency data from BWA’s Quarterly Market Report revealed insolvencies in the construction industry increased by 10% between Q1 2023 and Q1 2024. The manufacturing sector saw a 78% increase in the same period. In such a climate, it can feel difficult to maintain ongoing viability.
A multifaceted approach to ensuring viability
Acknowledging financial distress is an important first step, however, the most effective move you can make is to deploy an integrated strategy to combat it. An experienced insolvency practitioner can guide you through this process, ensuring you make informed and timely decisions. Here are four areas of business operations to address if you are looking to avoid liquidation.
- Cost Control: Implementing rigorous financial monitoring mechanisms. Without sufficient cash flow, operations can grind to a halt. An insolvency practitioner will help you develop a practical and focused financial plan, keeping the business afloat amid liquidity crises. A rolling 12-week cashflow forecast can be critical in the success of restabilising a business. It helps prevent surprises; you will be able to predict week-by-week the liquidity of the business, and you will be able to see how much your cashflow is depreciating allowing you to make an informed decision about the viability of your business before it is too late.
- Human Resources: Enhancing employee productivity and engagement.
An expert can help design policies and cultural shifts working towards a common goal.
- Efficiency and innovation: Fostering cost-efficient and productive business models sometimes takes creative and innovative thinking.
Working with a professional often provides the distance required for bigger-picture thinking.
- Confidence: Acting responsibly and decisively instils trust and respect from stakeholders. An experienced insolvency professional can guide directors through these challenging times, helping them to make astute decisions without hesitation.
Considering Voluntary Administration
BWA Insolvency is New Zealand’s leading provider of Voluntary Administration (VA) services. This legal process is designed to help companies facing financial difficulties avoid liquidation by providing a structured opportunity for recovery. It offers a temporary halt on creditor demands, allowing the company to explore its options for restructuring and regaining control. The process involves appointing an administrator who manages the company’s affairs, develops a recovery plan, and ultimately presents it to creditors for approval.
The Importance of Acting Fast
The worst course of action when facing potential insolvency is indecision. Delaying crucial decisions can lead to a deepened financial crisis, limiting options for keeping customers, staff, and stakeholders happy. A proactive approach is essential—in our experience, directors who are willing to address issues head-on have a greater chance of facilitating business restructuring and returning to viability.
Why Consult an Expert in Business Restructuring?
Business restructuring is not a one-size-fits-all solution. It encompasses a broad spectrum of activities designed to restore financial health and operational efficiency. The analogy of treating a failing business like a personal health crisis holds true. Ignoring symptoms of business distress is not only unwise but potentially catastrophic. Seeking expert advice is not an admission of failure—it’s a strategic move to enhance the survival and future success of the company.
At BWA Insolvency, we are committed to being your partner through this journey, delivering tailored solutions that ensure a brighter, more secure future for your business. Contact Bryan today for a confidential, no-obligation chat.